WHAT ARE STOCKS?

Define Stocks?

Stocks is defined as shares and equity that signifies ownership in a corporation or company.

What is Stocks in more detail?

Stocks are equity investments that represents the part ownership in a corporation that entitles the investors for the earnings and assets. Some stocks give the investor a voting rights but no guaranteed payments while other stocks also give payments to investor but no voting rights.

In the past, shareholders received a stock certificate verifying how much stocks they owned but today this is being done electronically.

In its simplest meaning, when you own a stock you own a portion of the company’s earnings and assets, you can now be called a shareholder. A company or corporation sells their stocks to raise money and grow the business. This will help the company generate more revenue and increase in value.

These companies sell their stocks through Stock Exchange and the investors can buy and sell these shares. Stock Exchange then track the supply and demand of each company's stocks which affects the stock price.

Prices of stocks fluctuate throughout the day but as an investor who own these stocks hope that the value of their stock increases. But sometimes a company can lose its value or go out of business and an investor may lose all of their investment, this is really risky. If this is risky, it is advised that an investor should not put all of the eggs in just one basket only, an investor should spread their money around and buy stocks in different companies instead of buying on just one.

You may know that an investor may do best over the long term by doing the buy and hold. Meaning they own a diversified portfolio of many stocks and hold onto them through bad and good times.

Investing in stocks individually takes time because you should always research on what stocks to buy or purchase. That is why some investors save time by investing in equity mutual funds, ETFs and index funds.

There are two types of stocks, common and preferred. Common stocks are stocks that does not guarantee a dividends but a preferred stocks pay a guaranteed fixed dividends.

 

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